The Next Steps for Medicaid Expansion

Apr 23, 2015

The Montana Budget and Policy Center is celebrating this week, as legislators on both sides of the aisle worked together to pass Medicaid expansion in both the House and Senate. After passing third reading in the Senate on Saturday morning, the Montana HELP Act is on its way to the Governor’s desk, where he is expected to sign the bill into law. And while some very hard work is behind us, we’re not quite done yet.

Once the Governor signs the Montana HELP Act, Medicaid programming will not immediately go into effect. Next, the state will have to submit a section 1115 waiver to the federal government to expand coverage and receive increased federal funds. Section 1115 waivers allow states to pursue experimental, pilot, or demonstration projects that promote the objectives of Medicaid, namely to keep low-income families healthy. (It’s called “1115 waiver” for short, because of the section in the Social Security Act where this flexibility is provided.)

Most of the 28 states that have expanded Medicaid coverage did it in the “traditional” form. The state simply raised eligibility levels under its current Medicaid program and accepted the higher federal match to do so. However, six states (Arkansas, Indiana, Iowa, Michigan, New Hampshire, and Pennsylvania) expanded coverage through the 1115 waiver process, which enables the state to craft its own expansion plan while still promoting the goals of the Medicaid program and protecting enrollees. Montana will join these states in expanding coverage using this waiver.

The Montana Department of Health and Human Services (DPHHS) will submit the 1115 waiver for approval by the federal Center for Medicaid and Medicare Services (CMS). CMS has made it clear that it will not approve a waiver that limits the number of eligible people who can be enrolled under the plan. The waiver request must also show that the program will not cost the federal government more than traditional expansion over a multi-year period (otherwise known as budget neutrality).

Waiver approval requires Medicaid expansion to cover adults up to 138% of the poverty line. No doubt, Montana’s waiver must include this feature (and the HELP Act does); otherwise the state will not qualify for enhanced federal matching funds that are critical for covering newly eligible enrollees and lowering uncompensated care costs.

While Montana’s HELP Act will require most new enrollees to pay premiums, the HELP Act limits those premiums to no more than 2% of the enrollee’s adjusted gross income. Furthermore, those living below the poverty line cannot be disenrolled from Medicaid if they do not pay their premiums (though the unpaid premiums can be a collectible debt by the state). While premium requirements will be a stretch for some low-income families, these families will not be threatened with loss of health care when they most need it.

Individuals will not be subject to cost sharing (co-pays) beyond current Medicaid rules. Current Medicaid programming allows plans to require cost sharing up to 5% of adjusted gross income. The Montana HELP Act also requires individuals to pay co-pays, but limits it to 3% of their adjusted gross income. This, combined with the premiums, will therefore stay below the total 5% cost sharing provided in current Medicaid.

CMS rejected initial waivers submitted by Indiana and Pennsylvania that made Medicaid eligibility dependent on employment or participation in certain work search activities. We know that the vast majority of those in the gap are already working; however, it is important to remember that some cannot work because they are too sick, but aren’t technically disabled, or they are taking care of children or a sick relative. The HELP Act does not have a work requirement, and thus is consistent with other approved waivers. The HELP Act does include some funding for workforce development and provides a voluntary program for new enrollees to receive training through the Montana Department of Labor and Industry.

The 1115 waiver process is an important step, and we will be closely following it. 70,000 Montanans are depending on it.